Pages

4/10/2008

Bush's Economic Perspective of Iraq

President Bush gave a statement today (April 10, 2008) on the state of Iraq's political, economic, and diplomatic state. The interesting part of the article was that Iraq is currently in a process of rebuilding. The country is stabilizing, other countries' embassies are reopening, and people are now feeling safe enough to rebuild. Iraq's proposed budget plans to outspend us ten to one in construction projects.

With a stabilizing environment and rapid growth, I would not be surprised to see investors begin their search for high returns. There will continue to be a large element of risk but a definite ability to find projects with higher returns. Iraq's rebuilding will definitely afford many the opportunity to find high returns on their foreign direct investment.

Good call comparing Iraq to Japan. I have often wondered what history will show for the American investment in Iraq 50 years from now. Look at both Germany and Japan, not only stable and valuable economic contributors, but relatively reliable allies for the U.S. It'll be interesting to see.

I would never compare the postwar aspects with Iraq to the losers of the Second World War. There are too many differences in the leading up to, and the follow up, to compare our victory in Operation Iraqi Freedom to the postwar successes and development of Germany and Japan. The actors of WWII were setting conditions for growth, and expansion of influences in the region. The regions in which fighting occurred were primarily out of the original sovereignty of the country. The countries had to literally "rebuild", due to the totality of war in the time. Finally, the postwar boom was supported, in both countries, by the investments of the United States and its allies, against the common enemy of the Soviet Union. Until we find a superpower to go head-to-head with, Iraq will always be a problem, and not a possible solution for the modern age of growth.

In America, we tend to overrate the influence of the Marshall Plan (and judge Iraq poorly as a result), and underrate the pro-market actions taken by people like Adenauer in W. Germany that simply don't have a parallel in Iraq.